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Funds Increase Stake in Clariant, Target Merger

Thursday, September 21, 2017

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A holding company seeking to prevent the pending merger between specialty chemical companies Clariant (Muttenz, Switzerland) and Huntsman International LLC (The Woodlands, Texas) has increased its stake in the Swiss company, but Clariant says it is still committed to the transaction.

White Tale Holdings, comprising hedge funds Corvex and 40 North, now owns more than a 15 percent stake in Clariant, the company confirmed Tuesday (Sept. 19). In an open letter to Clariant’s board of directors, White Tale confirmed that it continues to oppose the merger, which it first came out against in July.

Clariant
Clariant

Clariant says it continues to pursue a merger with Huntsman International LLC despite objections from activist hedge funds that have now bought up more than 15 percent of the Swiss company's shares.

The hedge funds say in the letter that the merger “has no strategic merit” and undervalues Clariant while overvaluing Huntsman. They go on to express concerns that Clariant would cede operation control to Huntsman, “demonstrating a severe lack of due diligence with regard to Huntsman’s operational track record.” They also say Clariant relies too heavily on synergies for value creation, while ignoring other methods that could create value “without giving away nearly half of that value to Huntsman shareholders.”

Clariant Statement

In a statement Tuesday, Clariant said that it disagrees with White Tale’s assertions that the terms of the deal undervalue Clariant and undercut other potential tools for creating value for shareholders.

Clariant said the deal, valued at $20 billion, is part of its strategy to become “a world leader in specialty chemicals,” noting that the combination of Clariant and Huntsman would create a balanced, diverse and attractive portfolio. The company said its financial advisors confirmed that the combination would be financially fair to Clariant shareholders.

Clariant said the merger will create more than $3.5 billion in value through cost and tax synergies and complementary product portfolios, and noted that while Huntsman’s president and CEO, Peter Huntsman, will become CEO of the new company, there will be no ceding of operational control along with the deal.

Huntsman Reaction

Peter Huntsman issued a statement Tuesday calling White Tale’s claims “demonstrably false attacks on Huntsman’s performance and its portfolio in a transparent and self-serving attempt to derail” the merger. Huntsman noted that Corvex and 40 North invested in Clariant only after the initial merger announcement, and accused the funds of advancing “a destructive, high-risk strategy of dismantling Clariant and denying all other stakeholders of the company the sustainable, long-term benefits of this compelling combination.”

Peter Huntsman
Huntsman

Huntsman president and CEO Peter Huntsman said in a statement Tuesday that he has no intention to meet with White Tale Holdings.

“I have not met with White Tale and have no intention to do so,” Huntsman added. “Their activism is all about the short-term, break-up value of Clariant and is not about Huntsman.”

About the Investors

White Tale Holdings, the chemical companies note, is a Cayman Islands-based holding company created by the two hedge funds. Corvex, run by activist investor Keith Meister, a protégé of investor Carl Icahn, is known for raising its stake in companies in order to influence their operations. Meister and Corvex have had high-profile conflicts with corporations including ADT Security and Yum! Brands.

Hedge fund 40 North is run by David Winter and David Millstone, and is associated with real estate developer Winter Properties and industrial holding company Standard Industries.

About the Merger

If the merger goes according to plan, it will close by the end of 2017, creating HuntsmanClariant, a company with $13 billion in annual sales. The merged entity will have global headquarters in Switzerland and operational headquarters in Texas.

Huntsman, founded in 1970, achieved more than $9.6 billion in sales in 2016. The company’s Polyurethanes division accounted for 38 percent of revenues; the Pigments and Additives division and Performance Products each accounted for 22 percent. Advanced Materials made up 10 percent of its 2016 sales, with the remaining 8 percent coming from Textile Effects.

Huntsman recently completed the spinoff of its titanium dioxide pigments business, now known as Venator.

Clariant reported sales of 5.8 billion Swiss francs—about $6.01 billion—in 2016. Its business units include Pigments, Additives and Catalysts, as well as Masterbatches (color additives for plastics), Functional Minerals, Oil and Mining Services and Industrial & Consumer Specialties. The company was formed in 1995 as a spinoff of chemical and pharmaceutical company Sandoz.

Clariant’s offerings for the coatings industry include pigments, pigment preparations and dyes, for decorative, automotive and industrial coatings.

The planned merger between the two companies comes after the merger of two other global chemical giants, Dow Chemical and DuPont. That deal closed at the end of August, and the newly formed company, DowDuPont, plans to split into three focused businesses in the coming months.

   

Tagged categories: Acquisitions; Clariant; Coatings raw materials manufacturers; Huntsman; Mergers

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